How Hotels are Fighting A Losing Battle in London

Feb 17, 2015

London is one of the world’s most popular destinations and home to numerous vacation rental properties. In 2013, it welcomed 16.8 million visitors from overseas. London is a powerhouse. It sets global precedents in economics and law. The trends in tourism that it sets have huge ramifications both within the city itself and abroad. It has now been the latest city to begin to firmly define its regulations for people offering short term rentals. Previously, anybody renting a property without planning permission was subject to a penalty of up to £20,000 for each violation. Now hosts are now set to be able to rent out their properties, without regulation, for up to 90 days of the year.

But not everybody is happy. In response to legislation regarding the regulation of short term rentals in London we read a quote from a member of the hotel industry, a manager of a 416 room London hotel who is lobbying to block this regulation:

Our concerns are more about the health and safety of the ‘hosts’ as much as the neighbourhoods that these private lets will occur in. As well as unfair advantages that these new ‘entrepreneurs’ have with no business taxes or employment legislation being needed by this new market.

Hotels are a comparable, but different, industry. They offer different services but compete for many of the same guests. They are worried that this regulation will lead to more and more people deciding to start offering short term rentals in the city that will eat into their customer base. They want this blocked, and the existing laws enforced more effectively. It may be cynical to say, but it is hard to imagine that safety is their primary concern. Another quote from the BHA (British Hospitality Association) shows another of their apparent interests:Ufi Ibrahim, chief executive of the BHA, said that the reputation of Britain as a safe and reliable international hospitality and tourism was heavily compromised by the Clause 33 being passed.

Professional vacation rentals know that their businesses can only enhance the reputation of the hospitality and safety in their area. It has long been a tenant of vacation rentals to provide a more personal, more hospitable service that people have come to expect from holiday accommodation. Another quote from the BHA suggests that they are blocking the regulation in order to ‘retain the residential integrity of local London communities’. It is interesting when short term rentals, mostly owned by local people supplementing their income are considered damaging to ‘residential integrity’ but a 416-bedroom Lancaster London hotel is not.

The response of the hotel industry demonstrates that there is still a certain mistrust and a sense that the two industries cannot work together. But it has not yet been mentioned that the hotel industry dwarves vacation rentals. The global hotel market turned over $480 bn, short term rentals have only just topped $1bn. In London, 72% of rentals are outside the major hotel areas. As a contest, it is not a fair fight. The lobbying from hotel industry smacks of clutching at straws, when they should be looking to see how the two industries can both operate in a city like London, rather than trying to legislate the other out of existence. Even if they managed to block this regulation there are already 23000 London short term rentals listed. The previous law was not being enforced across the city. Owners were protected by a cloud of confusion and able to rent out their property without too much concern about the ramifications.

The conclusion is that hotels and vacation rentals are going to need to be able to operate in the same city. Vacation rentals are growing rapidly, but they still do not come close to the revenue of the hotel industry, either in London or globally. The statistics show that there is still room for both.Some of Kigo’s portal partners have managed to devise ways to work together by collaborating with local hotels to offer the hotel services to their guests. This is one way that these two industries can work alongside one and other.
As well as the hotel industry, this news in London could be bad news for professional hosts that currently rent their property out all year round.For hosts that rent out their main property for just a few weeks a year, this regulation is perfect. It gives them protection from the law and allows them to continue earning money from their property when it is not in use. But for vacation rental businesses in the area, their potential revenue was just quartered.

In Thursday’s blog, we will be discussing what the impact of this 90-day regulation will be for full-time hosts.